Velocity and VC: 11

Startup Fundraising Process: 1957–2020

  • Entrepreneurs set up meetings with VCs and travel to their offices in SF, NYC, and/or Boston (this business is profoundly concentrated, with 85% of total assets under management in the US concentrated in just three states: California, New York, and Massachusettes).
  • A week or two later, follow-up meetings take place at the VC offices for broader exposure amongst the partnership and management teams.
  • Then, entrepreneurs host investors in their offices to provide the opportunity for a deeper dive into the business and a tangible sense of the culture as well as an opportunity to meet key executives.
  • Upon passing further due diligence to everyone’s satisfaction, the management team presents to the entire VC firm on Monday during the weekly partners meeting (which always, always happens on Mondays).
  • If the investment decision is made, negotiations on deal terms commence, and after some back and forth over a number of days and additional face-to-face meetings, term sheets are issued and signed.
  • Lawyers from both sides are retained to negotiate the definitive investment agreements.
  • Definitive agreements are signed, the investment is closed and money is wired.

Startup Fundraising Process: 2020–2021

  • Hold twenty to thirty Zoom meetings, each in 30-minute increments, over the course of a handful of days to meet prospective investors.
  • For deeper dives, 60 or 90-minute follow-up meetings are scheduled with a broader set of VC partners at the prospective firm along with various members of the management team — each of whom seamlessly Zooms in for their relevant portion of the meeting.
  • Like Flybridge, many VC firms have shifted their model from weekly Monday morning meetings to multiple meetings per week — after all, with zero travel and infinitely flexible schedules, it’s easy to coordinate the entire investment team’s calendars and hold more frequent, smaller time slots to meet teams and discuss investment opportunities.
  • Deal documents are now completely standardized and simple. For those of us who invest in the early stages, SAFE notes are the “currency of the realm,” which means there is very little to negotiate once an investment decision is made except for price and amount.
  • Any possible points of friction — meeting the entire partnership, meeting other members of the management team, negotiating deal elements, forming a full investment syndicate — have been eliminated or sharply reduced, easily squeezed in during the course of a day full of remote meetings over Zoom.

Some Data

Implications

Spinal Tap: Taking it to 11

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Jeff Bussgang

Jeff Bussgang

Former entrepreneur turned VC @Flybridge, teach @HBS, author of Entering StartUpLand and Mastering the VC Game